For many years, medical science told us that a little alcohol was a good thing. Moderate drinkers lived longer than teetotalers. But science has changed its mind about this, and consumers have taken note.
“We have bought into a storyline about alcohol that, when you really look at the facts, is not there,” said Randall Stafford, MD, PhD, a professor of medicine and director of the Program on Prevention Outcomes and Practices. “There is a mythology about alcohol having positive benefits as well as alcohol being neutral for human health.”
Americans are listening. Gallup, which tracks alcohol consumption in the US, reports a 90-year low. Just 54% of Americans now drink alcohol, down from 67% in 2022 and 60% in 2023. The percentage of Millennials and Gen Z consumers who drink alcohol is driving the trend; these numbers are down 10% and 9% respectively since 2023.
How borrowers are evolving
This change in national drinking habits is obviously hard on companies that make alcoholic beverages, such as wineries, distilleries, and breweries, but it's also affecting other kinds of businesses as well, such as bars, restaurants, and liquor stores. All of these businesses are learning to adapt to make up for lost revenue.
In Three Oaks, Michigan, Bill and Johanna Weltman own a brewstillery. The business opened in 2011 as a whiskey distillery, and in 2024, it added craft beer—called Sea of Monsters—to its menu, as well as an 18-person overnight rental space.
In Minneapolis, Minnesota, patrons can play pickleball while enjoying the beverages at Minneapolis Cider, and at BrewDog USA in Columbus, Ohio, overnight guests can enjoy a house-made craft beer on tap in each room. Nashville, Indiana boasts Hard Truth Cabin, where guests can be passengers on ATV rides and can sign up for a three-hour “moonshiner experience.”
These and many other small breweries and distilleries are expanding their offerings to include live music, lodging, private event spaces, expanded menus, and other activities. The additions are fun, but they also have a real business purpose.
- Customers stay longer. Adding attractions keeps customers on site longer. Instead of just stopping by for a drink, guests treat the business as a destination for an afternoon or weekend.
- Diversified revenue. A brewery that also sells spirits, rents pickleball courts, hosts overnight guests and serves as a wedding venue has more potential revenue streams and more reasons for customers to patronize it. These offerings can also attract off-season foot traffic and people who don’t drink, but are happy to be there for other reasons.
- Better lending terms. Most community financial institutions (CFIs) would rather lend to a financially stable destination business than to a production floor plus bar. Lower risk and higher income make these firms a more secure lending bet.
Is the decline in alcohol consumption affecting your loan portfolio?
The trend toward breweries and distilleries adding attractions isn't happening just because fewer Americans are drinking alcohol; The people who are drinking alcohol are also consuming less of it. In a single year, Gallup reports that the average weekly number of drinks consumed went from an average of 3.8 to 2.8. Overall, this is a portfolio-level concern, not a single borrower anomaly.
Breweries, distilleries, bars, restaurants, and other venues are all potential CFI borrowers that serve alcohol. They are all subject to market pressures, just as demand for their primary product is dropping.
- Market saturation. The number of craft breweries more than doubled between 2015 and 2024, from 4,803 to 9,796, intensifying competition and compressing margins. The market is now leveling: in 2025, 434 US craft breweries closed compared to only 268 openings — the second consecutive year closures outpaced openings — and total craft beer production dropped 5%. Several regional operators, including a 30-year-old Baltimore brewery and Texas-based 3rd Level Brewing, filed Chapter 7 in early 2026. For CFIs, this is less a warning sign than a filtering mechanism — overleveraged or undifferentiated borrowers are exiting, while destination-oriented, diversified operators are showing greater staying power.
- Margin compression in sub-premium tiers. At wineries, drinkers are moving up to more expensive wines. Bottles costing less than $15 aren’t selling well because customers don’t see them as high quality. Distilleries are finding that, despite years of increasing customer interest in high-end spirits, premiumization slowed in 2022 and 2023.
- In-venue consumption sharply down. The number of people who say that they drank in bars or restaurants dropped from 27% in 2015 to 16% in 2025.
- Collateral risk for inventory-heavy borrowers. Alcoholic beverage inventories are up 6.6% YOY. That can tie up working capital, indicate slower sales rates, and put pressure on liquidity.
Underwriting checklist for addressing the impact of declining alcohol consumption
CFIs should consider these factors before writing new loans and reviewing existing portfolio items connected to alcohol-dependent businesses.
- Inventory management. Are days of inventory outstanding trending up? Does the borrower have a plan if stock can’t move at target price points?
- Demographic sensitivity. What share of revenue depends on on-premise consumption? Does the borrower’s core customer skew toward Gen Z or Millennials, the two cohorts showing the steepest declines in alcohol consumption?
- Pricing power and margin compression. Is the borrower competing in the premium tier where resilience exists, or in the sub-premium tier under the most volume pressure?
- Market saturation. How many direct competitors have entered the borrower's market in the last three years, and what differentiates this borrower beyond geography?
- Export exposure. What percentage of revenue comes from international sales, and is the borrower exposed to tariff volatility? Those who import malt, hops, or spirits equipment from Canada, Mexico, or Europe could face real input cost pressure.
- Adaptation and diversification. Has the borrower launched nonalcoholic product lines or experiential revenue streams? Does management have a credible strategic response to the sober-curious trend?
- Stress testing and scenario analysis. Has the CFI modeled a downside scenario — say, a 20% revenue decline sustained over 18 months — across all alcohol-dependent credits simultaneously? What is the aggregate impact on classified assets, provisioning needs, and capital ratios if the sober-curious trend accelerates faster than projected?
The opportunity of non-alcoholic beverages
There’s still plenty of room for this business category to perform well. The non-alcoholic beverage category is growing rapidly. The global non-alcoholic beverages market is projected to grow from $1.39T in 2025 to $2.55T by 2033, and non-alcoholic beer in particular is driving strong volume growth fueled by younger consumers. Experiential revenue from events, taprooms, lodging, and pickleball diversifies and may even increase profit. Borrowers who innovate may have even stronger credit profiles after making worthwhile changes.
